Travel Industry News at TravelNewsAsia.com since 1997. Interviews, podcasts, videos, pictures and more
Wed, 28 October 2020

IATA Revises 2021 Airline Industry Revenue Forecasts Downwards

IATA has published new analysis which shows that the airline industry cannot slash costs sufficiently to neutralize severe cash burn to avoid bankruptcies and preserve jobs in 2021.

IATA reiterated its call for government relief measures to sustain airlines financially and avoid massive employment terminations. The airline industry association has also called for pre-flight COVID19 testing to open borders and enable travel without quarantine.

Total industry revenues in 2021 are expected to be down 46% compared to the 2019 figure of $838 billion. The previous analysis was for 2021 revenues to be down around 29% compared to 2019. This was based on expectations for a demand recovery commencing in the fourth quarter of 2020. Recovery has been delayed however, owing to new COVID19 outbreaks, and government mandated travel restrictions including border closings and quarantine measures. IATA expects full year 2020 traffic to be down 66% compared to 2019, with December demand down 68%.

Many Thai Airways aircraft parked nose to tail at Suvarnabhumi Airport (BKK) in August. Picture by Steven Howard of TravelNewsAsia.com. Click to enlarge.

The fourth quarter of 2020 will be extremely difficult and there is little indication the first half of 2021 will be significantly better, so long as borders remain closed and/or arrival quarantines remain in place. Without additional government financial relief, the median airline has just 8.5 months of cash remaining at current burn rates. And we cant cut costs fast enough to catch up with shrunken revenues, said Alexandre de Juniac, IATAs Director General and CEO.

Although airlines have taken drastic steps to reduce costs, around 50% of airlines costs are fixed or semi-fixed, at least in the short-term. The result is that costs have not fallen as fast as revenues. For example, the year-on-year decline in operating costs for the second quarter was 48% compared with a 73% decline in operating revenues, based on a sample of 76 airlines.

Furthermore, as airlines have reduced capacity (available seat kilometers, or ASKs) in response to the collapse in travel demand, unit costs (cost per ASK, or CASK) have risen, since there are fewer seat kilometers to spread costs over. Preliminary results for the third quarter show that unit costs rose around 40% compared to the year-ago period.

Looking forward to 2021, IATA estimates that to achieve a breakeven operating result and neutralize cash burn, unit costs will need to fall by 30% compared to average CASK for 2020. Such a decline is without precedent.

Factors contributing to this analysis include:

- With international demand down nearly 90%, airlines have parked thousands of mostly long-haul aircraft and shifted their operations to short haul flying where possible. However, because the average distance flown has fallen sharply, more aircraft are required to operate the network. Thus, flown capacity (ASKs) is down 62% compared to January 2019, but the in-service fleet is down just 21%.

- Around 60% of the world aircraft fleet is leased. While airlines have received some reductions from lessors, aircraft rental costs have dropped less than 10% over the past year.

- It is critical that airports and air navigation service providers avoid cost increases to fill gaps in budgets that are dependent on pre-crisis traffic levels. Infrastructure costs have fallen sharply because of fewer flights and passengers. Infrastructure providers could cut costs, defer capital expenditures, borrow on capital markets to cover losses or seek government financial relief.

- Fuel is the only bright spot with prices down 42% on 2019. Unfortunately, they are expected to rise next year as increased economic activity raises energy demand.

- While IATA is not advocating specific workforce reductions, maintaining last years level of labor productivity (ASKs/employee), would require employment to be cut 40%. Further jobs losses or pay cuts would be required to bring unit labour costs down to the lowest point of recent years, a reduction of 52% from 2020 Q3 levels.

- Even if that unprecedented reduction in labor costs were to be achieved, total costs will still be higher than revenues in 2021, and airlines will continue to burn through cash.

There is little good news on the cost front in 2021. Even if we maximize our cost cutting, we still wont have a financially sustainable industry in 2021, said de Juniac. The handwriting is on the wall. For each day that the crisis continues, the potential for job losses and economic devastation grows. Unless governments act fast, some 1.3 million airline jobs are at risk. And that would have a domino effect putting 3.5 million additional jobs in the aviation sector in jeopardy along with a total of 46 million people in the broader economy whose jobs are supported by aviation. Moreover, the loss of aviation connectivity will have a dramatic impact on global GDP, threatening $1.8 trillion in economic activity. Governments must take firm action to avert this impending economic and labor catastrophe. They must step forward with additional financial relief measures. And they must use systematic COVID19 testing to safely re-open borders without quarantine.

See latest Travel News, Video Interviews, Podcasts and other news regarding: COVID19, IATA, Traffic, Airlines, AAPA.

Headlines: Six Senses Signs First Hotel in Saudi Arabia  The Reykjavik Edition to Open 9 November  WTACH Appoints Nigel Fell as President and CEO  Russia, Ukraine and CIS to Need 1,540 New Planes by 2040  Six Legends to be Inducted into World Rugby Hall of Fame  Four Seasons Chicago Appoints Executive Chef and Director of F&B  Emirates Signs MOU with the Ministry of Tourism of Maldives  FAA Selects SITA's FANS-1/A-Based Datalink Solution to Manage Oceanic Airspace  Radisson Opens Fifth Collection Hotel in China  Qantas to Lease Catalina Lounge at Darwin Airport  CWT Appoints Laura Wang as Director of Global Supplier Management - China  Singapore Airlines Operating 14 Flights Per Week to Melbourne, Australia  Breeze Airways to Take Delivery of First Airbus A220 in Coming Weeks  Aviation Industry CTOs Issue Joint Call to Action to Deliver Sustainable Plans  Delta to Add 100 Daily Departures from JFK and LaGuardia  Governments Urged to Deliver on Commitments to Restore Global Connectivity  British Airways to Expand Use of VeriFLY  Hong Kong Airport Extends Relief Package to End-November  Rosewood Opens Luxury Hotel in Madrid, Spain  Franck Loison Joins Oakwood Residence Hanoi as General Manager  Rolls-Royce 747 Completes Test Flight with 100% SAF in One Engine  Emirates Airline to Recruit 6,000 Employees  Thierry Papillier Moves to Kuwait as Executive Chef of Four Seasons  Lufthansa Technik Appoints G. Ouzounidis as VP Corporate Sales Americas  Singapore Airlines to Operate Flagship A380 on Flights to Sydney  Honeywell Publishes 30th Annual Global Business Aviation Outlook  Thai AirAsia to Resume Flights from Bangkok's Suvarnabhumi Airport  Minor Hotels Signs First Property in Egypt  Boeing Forecasts Africa's Airlines to Need 1,030 New Airplanes by 2040  Scandinavian Airlines Expands Network as Travel Demand Increases  Air Montenegro Signs Pool Program Agreement with Embraer  Hilton Upgrading Digital Key Technology  BA Launches Quarantine-Free VTL Flights Between Singapore and LHR  Korean Air to Resume Hawaii Flights  AirAsia Malaysia to Resume Kuala Lumpur - Phuket Flights  Bangkok Airways to Resume Phuket - Hat Yai Flights; Reopen Lounges  Boeing Forecasts Middle East to Need 3,000 New Planes by 2040  Virgin Australia Renews Distribution Agreement with Amadeus  Finnair Signs Airbus' First European Contract for A320 FHS  48-Suite Six Senses Fort Barwara Opens in Rajasthan, India  Cathay Pacific's Passenger Numbers Increased 180% in September  Smiths Detection to Improve Cargo Screening in Tokyo and Kobe, Japan  Marriott Appoints Ty Breland as EVP and Chief Human Resources Officer  Korean Air's KUS-FT UAV Recognized as Top Industrial Tech Achievement  Making Long-Haul Aviation Compatible with Net Zero Goals  Indian Navy Takes Delivery of 11th Boeing P-8I  Hong Kong Airport Reports 127.4% Increase in Passenger Numbers  Qantas Brings Forward Resumption of International Flights to 1 November  Thai AirAsia X Expands Options For Those With Tickets To/From Japan, Korea  Emirates Celebrates Start of T20 World Cup with Special A380 Livery  Indonesia's Artotel Group Fuels Expansion with Series B Financing  Marriott Signs First Westin Hotel in Sao Paulo, Brazil  France Presents Shinya Katanozaka with Legion d'Honneur  Smiths Detection's BioFlash Air Sampler Can Detect Variants of COVID19  Melia's Third Hotel in Thailand to Open in December  John Davison, President and CEO of Four Seasons, to Retire in 2022  Etihad Airways Signs UPA Retailing Agreement with ATPCO  Marriott to Almost Double Number of St. Regis Resorts in Next Few Years  Malaysia Airlines and SEGi Sign MOU to Strengthen Aviation's Talent Pipeline  British Airways Launches Cabin Crew Recruitment Drive  JCAB Approves ANA's A320 and A380 MFF Operations  Boeing Appoints Heidi Grant as Vice President of Business Development  Frontier Airlines to Save Time and Money with Skywise Health Monitoring  7,200 Solar Panels Make Four Seasons Seychelles Even More Sustainable  Air Astana to Launch Flights to Phuket, Thailand; Increase Dubai Service  Air Canada to Increase Flights to Delhi, India  Singapore Airlines Partners Golden Door Spa Resort in California  UK Recovery Severely Delayed by Lack of Spending by International Visitors  Embraer-CAE Training Services to Establish Phenom 300E FFS in USA  Steering Group to Study Feasibility of Establishing Women's Lions Team  Elbit Systems Upgrades E-LynX Family of Software Defined Radios  Ascott Signs 1,905 Serviced Residences in Hanoi, Vietnam  Schedule for HSBC World Rugby Sevens Series 2022  CEVA Logistics First to Achieve CEIV Lithium Battery Certification  Cathay Pacific to Increase NDC Content on Amadeus  Amber Asher Appointed CEO of Standard International  Accor Implements GroupSync  Bombardier Signs MOU with Signature Flight Support  IATA Calls on Air Cargo Industry to Continue Working Together  SIA to Launch Vancouver, Seattle Flights; Convert San Francisco to VTL Service  COVID Helped Us Fast-Track Our Transformation Plans, says Tony Fernandes  Robert Cousins Appointed GM of Niccolo Suzhou  Kathy Fong Appointed CM of Sabre's Travel Agency Business in Hong Kong  Burj Al Arab in Dubai Starts Charging for Hotel Tours  Captain Izham Ismail Joins IATA's Board of Governors  Dassault Showcasing Full-Scale Falcon 10X Cabin Mockup at NBAA-BACE  NetJets Orders Up To 100 More Embraer Aircraft  Singapore Airlines Expands Vaccinated Travel Lane Network to 14 Cities  AirAsia Indonesia to Resume Jakarta - Bali Flights on 14 October  Qantas to Operate Direct London Flights Via Darwin, Australia  British Airways to Resume Airbus A380 Flights  Emirates to Add HBO Max to Inflight Entertainment  Air France to Operate Flights to 182 Destinations This Winter  Whitbread to Convert Former Police Station into a hub by Premier Inn  Air Belgium Takes Delivery of First of Two Airbus A330-900s  Smiths Detection Opens Technology Development Centre in Bangalore, India  France Bestows Peter Borer of HSH with Legion of Honour  Plaza Premium Opens Lounge at London Gatwick Airport  Dassault Aviation Upgrades Interior of Falcon 8X  ATR Opens High Tech Customer Experience Studio in Toulouse, France  United Airlines to Operate 91% of Domestic Capacity in December  Global Medical Response Orders 21 More Airbus Helicopters  BIG Members Can Now Redeem Points for Tech Courses at airasia academy  UK Reduces Red List from 54 Countries to Just Seven  Ascott Opens First lyf in China; Signs Second lyf in Bangkok, Thailand  AirAsia Signs Deal to Convert Remaining A320s on Order to A321neos  Quarantine Remains Biggest Deterrent to Air Travel  Outrageous Airport and ANSP Charges Will Stall Recovery, IATA Warns  Travellers Must be Fully Vaccinated to Fly with AirAsia Malaysia  United Airlines to Accept PayPal for Inflight Purchases  HD Videos and Interviews  Podcasts from HD Video Interviews  RSS News Feed and Ticker  Travel Trade Shows  High-Res Picture Galleries  Travel News Asia - Latest Travel Industry News 

Receive our Latest Travel News Daily Email free of charge by entering your email address and name in the boxes to the right and clicking subscribe. By subscribing, you agree with Revue's Terms of Service and Privacy Policy. You can also receive the news by WhatsApp, stay updated with our RSS Feed Travel Industry News by TravelNewsAsia.com, and even Add the Headlines to Your Website free of charge. Have questions? Please read our travel news FAQ.

     
Advertising
Advertising
Copyright © 1997-2021 TravelNewsAsia.com